You Call This Justice? DOJ Criticized for Its Settlement with “Too Big to Jail” Bank HSBC

DeptofJusticeSubmitted by Elaine Magliaro, Guest Blogger

Federal officials appeared quite pleased with themselves earlier this week when they announced their $1.9 billion settlement with HSBC. HSBC, the world’s third largest bank, has been accused of laundering money for Colombian and Mexican drug cartels and clients with ties to terrorists.

Lanny Breuer
Lanny Breuer

In July, a Senate Permanent Subcommittee on Investigations released a report about its probe into HSBC and its shady financial dealings. The subcommittee found that HSBC and its affiliates in the United States “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls.”

Democratic Senator Carl Levin of Michigan, chairman of the subcommittee, said:

“In an age of international terrorism, drug violence in our streets and on our borders, and organized crime, stopping illicit money flows that support those atrocities is a national security imperative. HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”

Money Laundering For Drug Cartels: The Dirt Behind HSBC’s Record $2 Billion Settlement

Despite the findings of investigations into HSBC’s money laundering activities, federal and state authorities decided not to indict the London-based bank. The New York Times called it “a dark day for the rule of law.” The Times said that authorities also chose not to charge “any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.”

From the New York Times Editorial on the HSBC settlement (December11, 2012):

Clearly, the government has bought into the notion that too big to fail is too big to jail. When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished. The deterrence that comes from the threat of criminal prosecution is weakened, if not lost.

Jimmy Gurulé, a professor of law at Notre Dame and former assistant attorney general, said the deal “makes a mockery of the criminal justice system.”

Glenn Greenwald called HSBC “the new poster child for US two-tiered justice system.” To support his claim, Greenwald wrote the following in a Guardian article on Wednesday:

The US is the world’s largest prison state, imprisoning more of its citizens than any nation on earth, both in absolute numbers and proportionally. It imprisons people for longer periods of time, more mercilessly, and for more trivial transgressions than any nation in the west. This sprawling penal state has been constructed over decades, by both political parties, and it punishes the poor and racial minorities at overwhelmingly disproportionate rates.

But not everyone is subjected to that system of penal harshness. It all changes radically when the nation’s most powerful actors are caught breaking the law. With few exceptions, they are gifted not merely with leniency, but full-scale immunity from criminal punishment. Thus have the most egregious crimes of the last decade been fully shielded from prosecution when committed by those with the greatest political and economic power: the construction of a worldwide torture regime, spying on Americans’ communications without the warrants required by criminal law by government agencies and the telecom industry, an aggressive war launched on false pretenses, and massive, systemic financial fraud in the banking and credit industry that triggered the 2008 financial crisis.

Rolling Stone journalist Matt Taibbi weighed in on the subject of the HSBC settlement being an example of a two-tiered justice system too. He said the bank deal “proves that the drug war is a joke.”

Taibbi wrote:

If you’ve ever been arrested on a drug charge, if you’ve ever spent even a day in jail for having a stem of marijuana in your pocket or “drug paraphernalia” in your gym bag, Assistant Attorney General and longtime Bill Clinton pal Lanny Breuer has a message for you: Bite me.

Breuer this week signed off on a settlement deal with the British banking giant HSBC that is the ultimate insult to every ordinary person who’s ever had his life altered by a narcotics charge. Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a “record” financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.

Taibbi said Breuer admitted there were times when drug dealers actually came to HSBC’s Mexican branches to deposit “hundreds of thousands of dollars in cash…using boxes designed to fit the precise dimensions of the teller windows.”

Evidently, the Justice Department rejected the idea of prosecuting HSBC because it might have “a damaging impact on the bank’s viability, and thus on jobs and the American economy.” The New York Times said that federal and state authorities feared that “criminal prosecution would topple the bank and, in the process, endanger the financial system.”

Taibbi says that kind of reasoning “is beyond flawed.” He continued:

When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC’s Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn’t protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most ‘reputable’ banks may in fact be captured institutions whose senior executives are in the employ of (this can’t be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department’s response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way.”

British Bank HSBC Makes $2 Billion Settlement (PBS)

GOP Senator Charles Grassley of Iowa sent a letter to Attorney General Eric Holder on Thursday. In it, he said that it was “inexcusable” for the DOJ “not to prosecute criminal behavior by the British banking giant HSBC.” Grassley continued, “What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists.” He added, “By allowing these individuals to walk away without any real punishment, the department is declaring that crime actually does pay.”

Assistant Attorney General Lanny Breuer defended the settlement during a news conference in New York on Tuesday. Breuer said, “HSBC is being held accountable for stunning failures of oversight.”

Failures of oversight????? I’d say that’s an understatement! What do you think?


DOJ officials unblinkingly insist that the banking giant is too powerful and important to subject to the rule of law (Guardian)

Outrageous HSBC Settlement Proves the Drug War is a Joke (Rolling Stone)

Taibbi, Spitzer Fume Over HSBC Settlement (Rolling Stone)

HSBC to Pay Record Fine to Settle Money-Laundering Charges (New York Times)

Too Big to Indict (New York Times)

HSBC: Too big to jail? (CNN)

Final Thought On HSBC Settlement: How Much Bad Behavior Will We Tolerate? (Forbes)

Two big British banks reach controversial settlements (Economist)

Grassley blasts Holder for HSBC settlement (KETV)

HSBC Exposed U.S. Financial System to Money Laundering, Drug, Terrorist Financing Risks (Senate Subcommittee Report)

53 thoughts on “You Call This Justice? DOJ Criticized for Its Settlement with “Too Big to Jail” Bank HSBC”

  1. OH MY GOD BEARER BONDS AND TRAVELER’S CHECKS! ARMAGEDDON IS NIGH!!! The fact the US government proclaims certain countries “rogue jurisdictions” and continues to prosecute a war on drugs that fosters Mexican cartels shows how absurd things really are. Two billion dollars is enough of a shakedown for such activity. If we are going to prosecute business folks for non-compliance with such subjective laws, when will we start prosecuting government officials for violating the Constitution.


      When you lead with traveler’s check and bearer bonds you make it seem pretty trivial.

      But the traveler’s check, bearer bonds and other financial instruments totaled 200 trillion dollars – that’s no mistake, that’s trillions with a T.

      If you think the money laundering rules should be changed then you should make that argument.

      But in my opinion, this case is the wrong case.

      You did not seem particularly concerned when any average Joe was flagged for putting down $10,000 for a new car.

      I really don’t see much subjective about a bank initiated program to alter documents to conceal point of origin to make the transactions difficult or impossible to trace. That seems pretty objective to me – and by the way – criminal.

      But I do have a modest proposal: why not dispense with the fine altogether and go for the prosecution by itself. I think that makes a lot more sense.

  2. Bin Laden film leak was referred to Justice; leaker top Obama official

    Source: McClatchy Newspapers

    Pentagon investigators concluded that a senior defense official mentioned as a possible candidate to be the next CIA director leaked restricted information to the makers of the acclaimed film on the hunt for Osama bin Laden, and referred the case to the Justice Department, according to knowledgeable U.S. officials.

    The Justice Department was sent the case involving Under-Secretary of Defense for Intelligence Michael Vickers in September, but it so far has declined to launch a criminal prosecution, said two senior U.S. officials who requested anonymity because of the sensitivity of the matter.

    The case involved a determination by investigators of the Pentagon’s inspector general’s office that Vickers provided to the makers of the film, Zero Dark Thirty, the restricted name of a U.S. Special Operations Command officer who helped plan the May 2, 2011, raid on bin Laden’s hideout in Pakistan, one official said. The identities of special forces personnel can be classified in certain circumstances and making them public is against the law, according to experts.

    Vickers, a former Army special forces operator and one-time CIA paramilitary officer, is the top intelligence adviser to Defense Secretary Leon Panetta and oversees the Pentagon’s vast intelligence operations. He has been frequently mentioned as a candidate to replace retired Army Gen. David Petraeus as CIA director.

    Read more:

    So, the whole prosecution of Bradley Manning and Wikileaks is based on leaking classified info. Yet here we are, another example of being a nation of men, not law.
    Why isn’t ol’ handsome Joe calling Vickers a “high tech terrorist”?

    1. “Why isn’t ol’ handsome Joe calling Vickers a “high tech terrorist”?”

      Hmmmm….ummmm… because Vickers spilled the secretes the old fashioned way over dinner in a club somewhere between K Street and foggy bottom?

  3. Just one more bit of evidence, as if we needed it, that they guy who promised us “hope and change” gave us neither.

    In my view, this is our current situation: 1) Both parties are whore’s paid by the same folks with little real difference between them; 2) recognizing that their interests are essentially the same and, that their only real enemy is “we the people” , both parties have gerrymandered districts and state primary systems to ensure i) that they each have their safe states and ii) that no third party is viable; and 3) the media, in a twisted incestuous/co-dependent relationship with these folks from both sides ensure that no alternate views are given a serious chance — they agree to debate rules that ensure no real debate occurs, they keep third parties out of the debates and coverage in general.

    We really have no choice other than two, incredibly corrupt bad ones.

    The next time one of these dirtbags, no matter how fresh he/she looks, promises “hope and change” — just remember, its all bullshit. He/she just wants to screw you and get power. You have no hope, no hope at all, for any change.

  4. Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won’t Recover
    Posted on November 4, 2010 by WashingtonsBlog

    As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail.

    And Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. See this, this and this.

    Nobel prize winning economist Joseph Stiglitz just agreed. As Stiglitz told Yahoo’s Daily Finance on October 20th:

    “This is a really important point to understand from the point of view of our society. The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.”

  5. Stunning Crimes of the Big Banks: Worse than Your Wildest Imagination
    Posted on August 1, 2012 by WashingtonsBlog

    Preface: Not all banks are criminal enterprises. The wrongdoing of a particular bank cannot be attributed to other banks without proof. But – as documented below – many of the biggest banks have engaged in unimaginably bad behavior.

    You Won’t Believe What They’ve Done …

    Here are just some of the improprieties by big banks:

    – Funding the Nazis

    – Laundering money for terrorists

    – Financing illegal arms deals, and funding the manufacture of cluster bombs (and see this and this) and other arms which are banned in most of the world

    – Launching a coup against the President of the United States

    – Handling money for rogue military operations

    – Laundering money for drug cartels. See this, this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)

    – Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

    – Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here

    – Artificially suppressing gold prices

    – Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

    – Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

  6. @Elaine M.

    Thanks for the referenced. Looks like you have managed to budget my spare reading time for the indefinite future.

    But at this point I would really like to see a similar study of the DOJ process that lead to the decision not to prosecute any individuals, and the basis for the calculation of the fine.

    Some of you, more generous the I am, might claim that DOJ made exactly the right decisions. But lets put it out for examination and see if the decisions by DOJ really bear scrutiny

    One final point. Much has been made of the economic consequences following from prosecution of the bank. But once we realize the possibility of negative consequence, doesn’t it seem that coordinated action by DOJ, Treasury and other agencies could mitigate many of those consequences?

    Aren’t large banking organizations supposed to have contingency plans to assure an orderly shut down in case of an economic emergency?

    I realize there would be serious consequences to prosecution of HSBC. But there also seem to be very serious consequences to not prosecuting them. And by now we know how to deal with the issue of failure of large financial institutions.

    So what exactly is the problem? What exactly is the hold up?

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